Price tag to fix Phoenix pay system nearly doubles, expected to cost up to $50 million

Deputy Minister of Public Works and Government Services Marie Lemay listens to a question during a technical briefing on the Phoenix pay system on Thursday, Aug. 11, 2016 in Ottawa.Justin Tang / THE CANADIAN PRESS

The latest price tag to fix the federal government’s troubled Phoenix payroll system has nearly doubled and is now expected to cost up to $50 million by the end of the year, says the senior bureaucrat overseeing the repairs.

Marie Lemay, deputy minister of Public Services and Procurement Canada, said the latest estimate doesn’t include the cost of setting up a new claims system to reimburse the untold number of public servants who faced financial hardship because they weren’t paid properly, on time or at all. The government has promised to reimburse employees’ out-of-pocket costs.

Lemay said the department’s latest estimate of between $45 million and $50 million by March 31, the end of the fiscal year, could rise if further “unforeseen” costs crop up. She said the $70 million the new payroll system was supposed to deliver in annual savings beginning this year will not materialize.

Last month, the government estimated the cost to fix Phoenix at $25 million and counting.

However, Lemay said she remains confident that once the system reaches its “steady state” — and is operating smoothly with all the bugs worked out – Phoenix will end up saving the government money.

The extra costs are mostly due to hiring new compensation advisers, training them, setting up a new Toronto call centre, creating a satellite pay centre in Gatineau and establishing a network of pay office hubs, such as in Winnipeg, Shawinigan, and Montreal.

The department has so far hired 195 of the extra 250 compensation advisers it thinks are needed to work through the backlog while the central pay centre in Miramichi, N.B., takes care of regular payroll. She said new recruits will stay as long as they are needed.

Lemay said about $6 million is going to IBM, the company hired to adapt PeopleSoft to become the Phoenix system, for extra work that is outside the scope of its original contract.

When pressed about IBM”s responsibility for the foulups, Lemay said IBM did its job and that the big problems were related to the way the “transformation and implementation” was handled. She said the department underestimated the learning curve for Phoenix and the impact it would have on work and the culture within the public service when it rolled out new system in two phases in February and April.

Lemay said the impact of the problems plaguing Phoenix is “unacceptable” and the focus is to get those problems fixed and to get money flowing to employees properly.

Despite the problems, Lemay said progress is being made with only 59 new cases of public servants without a paycheque on Wednesday. They are the government’s priority and are entitled to emergency or advance payments.

Another 335 people reported problems getting pay this week because they went on leave, left the public service or retired.

There are about 67,500 people with other pay problems in the backlog, down from the 82,000 in early July, meaning 14,500 cases have been dealt with. Lemay said the department still expects to have the rest of the backlog cleared by its promised Oct. 31 deadline.

But she warned that meeting the that deadline doesn’t mean Phoenix will be operating smoothly and consistently, which she calls “steady state.” That could take more time.

The other looming deadline for Phoenix fixes is end of the year so T4 slips can be issued for the tax season. Public servants who have been overpaid or underpaid are braced for all kinds of tax headaches. T4s are a statement of income received, rather than the income earned, in a year.

The government’s massive United Way workplace campaign also kicked off Wednesday, but canvassing public servants for donations will be put off until November when Phoenix’s problems are hopefully resolved.

The campaign is heavily reliant on public servants using payroll deductions to make their annual contributions. Many are anxious that Phoenix works so erratically that any changes to their pay could leave them with no pay cheques at all.

Lemay tried to assure public servants that shouldn’t be a problem. She said the system has been tested, “checked and re-checked” and can handle deductions without foulups. But she encouraged those who are worried to make their donations in other ways, such as by cheque, credit card or cash.

The big worry is that donations made by payroll deduction are typically more generous than those by cash or cheque.

Public Services has been holding briefings every payday to update the status of the repairs and number of public servants who have been overpaid, underpaid or not paid at all. Wednesday was payday for nearly 300,000 public servants.

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Price tag to fix Phoenix pay system nearly doubles, expected to cost up to $50 million